First Data’s pending $22 Billion all-stock sale to Fiserv
is being positioned as “SMB payment enablers + big bank payment accounts.” It’s more complex than that, but First Data’s swing to a new era of SaaS marketing and logistics services played a key role in the sale.
It also reinforced the role of payment platforms in the next generation of customer acquisition, knowledge, engagement and promotions. Under terms of the sale, Fiserv will control 57.5 percent of the new company, while First Data will control 42.5 percent.
Looking back to 2013, such a deal might not have seemed possible. (Full disclosure: I provided research services for the company during this period). First Data had a major hole to dig itself out of. KKR, the LBO specialist that took over the company in 2007, had apparently come to see the company as a debt-laden white elephant that would be better off broken up into pieces.
While First Data had been an industry leader in traditional payment processing, it had also developed a stodgy reputation as the provider of hard-wired POS machines and payment services. These weren’t able to recognize customers, access customer histories, easily change prices, reflect promotions, get away from cash register stations or work with third party value-add services.
At the same time, the company was getting boxed out at the corporate level by consolidation in the payments industry, exemplified by last year’s merger of Vantiv and Worldpay.
But new management led by Frank Bisignano, a former J.P. Morgan Chase COO, saw the new generation of cloud-based services and big data as a path towards repositioning the company for an IPO. Under their direction, the team strongly emphasized its big data capabilities for retailers, as well as the massive potential of the under leveraged SMB market. The company successfully IPO’d in 2015.
For the SMB piece, Bisignano’s team started with the acquisition of Clover, a tablet-based mobile POS company that allowed SMBs to use the POS as a mobile brain center with access to third party apps. Clover is now one of the main providers of SMB POS services, along with Verifone and Poynt.
It also bought Perka, a loyalty card and reviews program that has been largely integrated into the Clover platform; Gyft, an e-card gift company; and last year, Card Connect, a mobile payment processor program for SMBs. These SMB services represented a relatively small part of First Data’s business, which remains largely tied to corporate accounts – the company facilitated $2.4 Trillion in sales last year.
None of the new services are clear home runs in their respective areas at this point. They are going up against heavyweights such as Square and PayPal and the strong interest in e-wallets shown by Apple, Google and others. But they have underscored a real commitment to playing a key role in the next generation of services.